I'm Anne. I've been preparing taxes for 27 years, and I'll be helping you today.
Since you are not in business with your son, you can not characterize this loan as a business loan. It is a personal loan for you.
If your son agrees, you two could create a Partnership
, with him as the "General Partner", meaning he's the one that's actively working, creating income
for the business. You would be a "Limited Partner" investing "$"in the business. The Partnership can then pay you back through distributions
from the business. (See Form 1065, http://www.irs
Your son may take the depreciation
and/or Section 179 for the equipment.
The section 179 is generally only available the first year that your son puts the machine into use, however he must have enough income to offset the Section 179. This income limitation
includes W2 wages that he or his spouse (if filing
If your son does not have enough income to offset the 179 deduction, he can carry it over to the next year.
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